GM sale cleared by bankruptcy judge
A bankruptcy judge has ruled that General Motors Corp. can sell the bulk of its assets to a new company, potentially clearing the way for the automaker to quickly emerge from bankruptcy protection.
U.S. Judge Robert Gerber said in his 95-page ruling late Sunday that the sale was in the best interests of both GM and its creditors, whom he said would otherwise get nothing.
"As nobody can seriously dispute, the only alternative to an immediate sale is liquidation — a disastrous result for GM's creditors, its employees, the suppliers who depend on GM for their own existence, and the communities in which GM operates," Gerber wrote in his ruling.
The ruling comes after a three-day hearing that wrapped up Thursday, during which GM and government officials urged a quick approval of the sale, saying it was needed to keep the automaker from selling itself off piece by piece.
"This has been an especially challenging period, and we've had to make very difficult decisions to address some of the issues that have plagued our business for decades," GM president and CEO Fritz Henderson said in a statement early Monday. "Now it's our responsibility to fix this business and place the company on a clear path to success without delay."
But attorneys for some of GM's bondholders, unions, consumer groups and individuals with lawsuits against the company argued for its rejection, saying that their needs were being pushed aside in favour of the interests of GM and the government.
'Far from over'
It was unclear early Monday if any of those groups planned to appeal Gerber's decision. The deadline to appeal is noon Thursday, after which point Gerber's order takes effect and the sale is free to close.
Last month, a group of bondholders and others took their objections to Chrysler LLC's sale plan all the way to the Supreme Court, delaying the Auburn Hills, Mich.-based automaker's exit from bankruptcy protection.
Several consumer groups have objected to provisions in the sale that free the new company from liability for consumer claims related to incidents that occurred before GM went into bankruptcy protection.
That means that people injured by a defective GM product in connection with an incident that occurred before June 1 would have to seek compensation from the "old GM," the collection of assets leftover from the sale, where they would be less likely to receive compensation.
Joanne Doroshow of the Center for Justice and Democracy said in a statement the issue "is far from over."
"It is morally reprehensible that GM will pay for injuries and deaths that occur after the bankruptcy process, but not for the hundreds of victims who have already been hurt by defective GM cars," Doroshow said.
Government-backed plan
GM's government-backed plan for a quick exit from Chapter 11 hinges on the sale, which will allows the automaker to leave behind many of its costs and liabilities. The Treasury Department has vowed to cut off funding to GM if the sale doesn't go through by July 10.
The Detroit car maker's Chapter 11 filing on June 1 was the fourth-largest in U.S. history.
GM will leave bankruptcy court with significantly reduced debt and labour costs, as well as fewer dealerships and brands. But it's still operating in an environment where fewer Americans are buying cars. At the current pace, automakers will sell about 9.7 million vehicles this year. That's a reduction from sales of more than 16 million vehicles as recently as 2007.
In June, the automaker captured 20.3 per cent of the U.S. market. GM has estimated that it can maintain a market share between 15 and 17 per cent, reflecting its plan to sell off three brands and end its Pontiac line.